Search for:
Business News for Tuesday January 6, 2009
|
EC warns on legality of Alitalia bailout
Thursday April 24, 2008
The European Commission raised doubts Thursday that a €300 million ($478 million) bailout for Alitalia, Italy's cash-strapped national airline, complies with EU rules on public aid for companies. EU spokesman Michele Cercone, said an initial review "raised doubts about the nature" of the measure Romano Prodi, Italy's outgoing premier, announced Wednesday.
EU officials suggested privately that Italy take the EU's lukewarm reaction to heart and hold off on granting the aid. They said if the aid is formally disallowed, Alitalia and the Italian government can be sued by rival airlines and the aid may have to be paid back. Under EU law, the European Commission judges public aid to make sure it does not give struggling companies a competitive edge without performance-improving reforms. The €300 million bailout is meant to keep Alitalia flying and out of bankruptcy protection while a new bidder can be found after Air France-KLM withdrew a takeover offer because of resistance from Alitalia unions to forced layoffs. Suffering from competition from low-cost carriers, operating an outdated fleet and hurt by labor protests, Alitalia loses about €1 million ($1.6 million) a day. It has been lurching toward bankruptcy protection, which could force it to lay off thousands of employees and eliminate unprofitable routes. Italian Prime Minister-elect Silvio Berlusconi has said he expects Italian investors will be ready to present a bid for Alitalia within a month. Italian officials call the aid a "bridging loan" to be repaid by year's end. The amount was double what had been expected because of a request by Berlusconi's aides. Italian officials explained the loan to EU officials Wednesday evening, but Cercone said they raised more questions than answers. "They maintain the measures are not state aid, because the loan is being made on commercial terms," Cercone told reporters. But, he added, "It is already clear that in the next couple of days our services will send a letter to the Italian authorities informing them of a number of doubts we have about these measures and requiring more clarification. We need a clear picture" Over the years, the EU has come to take a dim view of state aid and limits these to once a decade. The last time Alitalia received state aid was in 2001. It received a bridging loan in 2005. The EU allows such loans only if they are repaid and lent under commercial market conditions.
More Business News
|